Public Provident Fund Calculation for Rs 1 crore: Investing in Public Provident Fund (PPF) is a better and safer option for investors. In this, not only do you get tax benefits on investment, but there is no tax to be paid on the interest amount and maturity amount received on the investment. Apart from this, there is another feature of investing in PPF, so that if you want, you can create a fund of Rs 1 crore or more.
Most of the investors are not aware of how the interest on PPF is calculated. Before investors start investing in PPF, it should be assessed whether it is a better decision for them to invest every month or invest a lump sum amount. Apart from this, they should also calculate the interest on their deposits.
How to choose the right ETF? These parameters should be kept in mind before investing
This is how interest calculation on PPF is done
For interest calculation, that amount is taken in the PPF account between the fifth day of a month and the last day of the month. This means that if a subscriber contributes after the 5th of any month, then interest will be calculated on the amount in his account in the previous month. Conversely, if the contribution is made before the 5th of any month, then interest will be calculated on the balance in this month along with the previous month.
If you want to create a fund of Rs 1 crore, then the contribution should be made in the PPF account before the 5th of the month. Interest is calculated every month on PPF balance but credited to the account only at the end of this financial year.
Create a fund of 1 crore by continuing the account for 25 years
At present, the interest rates of PPF have been fixed at 7.1 percent. Assuming that the interest rate will remain the same for the next 15 years, then if you contribute Rs 1.5 lakh annually or Rs 12,500 every month, then after 15 years a fund of Rs 40 lakh will be ready. It should be noted here that the government revises the interest rates every quarter, so this rate can be higher or lower during the investment period.
According to the PPF Scheme 2019 Rules, the account can be extended in blocks of five years. To create a fund of Rs 1 crore, the tenure of the account has to be extended. Now if after 15 years, if you extend the PPF account for five more years, then after 20 years at the rate of 7.1 percent, a fund of Rs 66 lakh will be ready. After this, if the PPF account is extended once more for a block of five years, then on completion of the period of 25 years, a fund of about Rs 1 crore will be ready.
(Article: Rajeev Kumar)